Welcome to the era of “tip creep”

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Jordan Heath-Rawlings I’ll start with my little story about tip creep. You probably have a story or two as well. So there’s a little craft brewery near my house and they’re great. I occasionally go there for a quick lunch or dinner and a pint or whatever. And the service, the food and the beer are always fantastic. And so when the server brings the machine over and it offers me a prompt to tip 18% or 20% or 25%, I hit 20%.

That’s all good. It’s a really nice little small business interaction as it should be. Now, I also go to this brewery to purchase cans of beer to drink at home or to bring along when we are invited to someone’s house. I will take my own bag, I will walk up to that counter. I already know exactly what I want because this is my local spot and I ask for it. And the clerk manning the bottle shop will get about a dozen cans from the fridge and put them in my bag and then hand over the machine for me to pay for it.

And I get the exact same prompt encouraging me to tip 18 to 25% for the beer. Of putting a dozen cans in a bag. It’s awkward to decline to tip. And besides, I like the place, so I usually just hit other and I tip a buck or two the same way you would if a bartender poured you a beer. That’s my story. There are others, our guest today has been chronicling them and the point of discussing this issue is not to whine, it’s not to shame service workers, and it’s not to tell you to stiff them or any of that stuff. It is to ask some questions about what has happened to the practice of tipping over the past few years as society has increasingly gone cashless as tip prompts have risen, as new businesses begin to ask for tips and as employees whose living wage should be covered by the company that pays them. Find themselves relying on increasingly generous strangers to make ends meet. It is really easy to look at a tip as an interaction between two people, but it’s not. It’s an interaction between competing economic systems and right now one of those systems is changing rapidly and the other isn’t. And that’s it.

I am Jordan Heath-Rawlings. This is The Big Story. Corey Mintz is a food reporter. He is the author of The Next Supper: The End of Restaurants as we knew them and what comes after. As I mentioned, he is chronicling tip creep, and he did so recently in the Globe and Mail. Hey Corey.

Corey Mintz Hello Jordan.

Jordan Corey, what is tip creep? Can you define it?

Corey Mintz Yeah, there seems to be a little bit of disagreement on that. Tip creep to me encompasses two things. It’s the expansion of the types of businesses that expect us to tip, and they do so through a prompt at the digital payment terminal and the percentage that they expect, and they do that by presenting us with a list of options, you know, 10, 15, 20, a thousand percent, all of which used to be done not exclusively through restaurants, but restaurants, your hairdresser, a few other places, taxi cabs, and was largely voluntary and done based on the cultural expectations of consumers.

Jordan When did tip creep begin? I know it’s probably hard to point to a specific date but is this a pandemic thing or does it go back further than that?

Corey Mintz I think the percentage thing dates before the pandemic. I’m certainly, when I was growing up, I was told 15% was standard. But I was told that by my father, so take that with a grain of salt. He definitely never worked in the service industry. You know, when I went to cooking school and started cooking and working in restaurants in there and, and therefore talking to servers led a very different perspective. I was told, at least if you work in a restaurant when you go out to eat, you better tip 20%. And, and that became my standard. But in recent years, in recent, I’d say like the seven or eight years, I think more common, most diners who have not worked in restaurants tip towards 20%. And, and the, the data from Square, the restaurant software company, sales company bears that out. The average is something like 17 or 18%. But definitely in the last few years we’ve, we’ve seen, you know, in this real measurable way, cuz you notice it when you go to the payment terminal, the range, they’re presenting you for the prompts and it really has shifted from the sort of 10 to potentially 25% range to the 18 to to 30 and even higher range.

Jordan So I know for the last little while on social media, you’ve been kind of casually collecting examples of these, uh, either from your own experience or from other people talking about it. Can you share just a couple of the most egregious, just so we get a sense of what we’re talking about here? And I wanna also say before I get you to do that, that when I talk about egregious examples of tip creep, none of this is on the servers and we’re gonna get to that. So maybe just give us some examples before we get into like what’s behind it.

Corey Mintz I think because I write tipping a lot for a variety of publications, you know, I always get these emails or stories after the fact. You know, in terms of egregious, the thing that really set me off was, I’d written something about tipping recently, and I think it was when Starbucks introduced their, their tipping recently. And I wrote something for, for NBC about that, uh, specifically at the drive-through, you know, and it really seems to have divided both customers and employees. And someone contacted me to say, to, to mention that they had gone to a grocery store here in Winnipeg where I live and had gotten a tip prompt. And that just made my head spin because that to me is like just another frontier. Um, and I of course wanted to know privately which place, and it turned out to be more of a boutique upscale place. Nevertheless, I went myself to check it. I just had to know firsthand, and I went and they have sort of, I wouldn’t call it a coffee bar, but they serve coffee within the place and that’s where the cash is. And maybe that’s some justification that it’s almost like a barista, but it’s not. I went to buy, you know, bread and I got a tip prompt.That was really the moment for me that said, if we don’t start having a discussion about this as consumers to understand what this is, what it means, the causes for this and, and I would argue and fight back against it and say no, then it just is going to be tipping everyone everywhere all the time.

Jordan Who benefits the most from what you just described? Tipping everywhere, everyone, all the time. On the surface, it would appear to be people working, uh, service industry jobs, or I guess not even service industry now, grocery store jobs.

Corey Mintz I wouldn’t say so. I, I’d say the people who always have benefited from tipping are, first of all, yes, servers in nice restaurants where people genuinely make hundreds of dollars, uh, an evening in tips, right? It’s not to say the job isn’t incredibly hard, uh, physically and emotionally, but a server in a really good restaurant can work three or four shifts a week, um, and, and make more than I make. And they have always been the prime beneficiaries of tipping. But next to that, there’s also customers. There’s a certain type of customer, maybe, maybe even a very large segment of customers who really enjoys and values the power they have over servers, through tipping. You know, it’s part of their restaurant experience. They often express it as tipping is how I let someone know they did a good job or it’s, you know, how I let them know they didn’t have a good job. That’s insane. You know, you don’t work on tips. I don’t work on tips. Police don’t work on tips. Dentists, I can keep naming professions—you get the impression. Most people are able to do their jobs without being incentivized by tips. And people who work in a sales capacity, who receive a commission, that’s a very different thing. Their commission is not determined by the customer and it’s built into the price, which is a separate thing we, we can get into. But the other person who really benefit by tipping, they don’t like it, but they benefit by it is, is business owners. Uh, business owners who, if they had to pay that amount, To the people being tipped, meaning if a restaurant owner had to pay a server in wages, what they expect to earn in tips, they would first of all have to raise menu prices. We can get into that, meaning more money’s coming in revenue, therefore it’s taxable, and then they gotta pay taxes on it again as payroll tax. So the current system, which is incredibly obfuscated and fragmented in which no two restaurants operate the same way, no two divide their tips up and share them up in the same way, but ultimately, I just spoke with someone, uh, from Restaurants, Canada, the lobbying organization last week. Ultimately even post pandemic, it’s tips are still distributed in the way they were pre pandemic, which I, I still find shocking, which is now that we have the majority of money coming in revenue for restaurants through credit cards, uh, there isn’t enough cash to distribute tips. Restaurants don’t legally want to be receiving that cash, cuz then it would count as revenue. So they gotta go to the bank, withdraw cash, and then put it in a bunch of envelopes for servers to pick up. In 2023, we’re still doing this.

Jordan You mentioned, you know, now post pandemic, lots of people would debate post pandemic, but I know what you mean. People are back in person in restaurants. I knew what you meant. How did the pandemic really supercharge tip creep? Obviously one of the things you just touched on is a big part of it, digital, uh, payment options. But how else?

Corey Mintz Well, that’s the real catalyst in terms of capability. You know, for me, I, I, I used to love cash. I always, I shouldn’t advertise this. Um, I always had to have $200, whether it was in my pocket or at home or like, but I couldn’t leave the house without some cash in my pocket. Even if I gradually stopped using it over the years. I just was like, but what if I’m, what if I need to take a cab? What if I’m kidnapped? I have to have cash. And the pandemic re finally ended that for me, finally made me go, all right, I don’t wanna be physically touching stuff all the time. Cash is dirty and it’s nuisance and quite frank, you know once Canada had the chip system everywhere with the, with the cards debiting credit, it was like, man, this is a lot easier. It’s also much easier for, for, for invoicing. Yeah. But it meant that I saw the same thing happening with everyone everywhere. We really phased out cash as much as possible, which of course is, is another level of leader because there’s people who don’t have digital payment systems. But it became so standard to pay digitally and therefore to really finally displace that old bowl with a little sign that says, you know, tips written in a sharpie and make it a simple addition to the payment system where just before you know, you get, you see your total, your subtotal with tax, and just before you go to pay, you get that tip prompt. Then introducing that tip prompt became just so easy, you know, with the, with the variety of payment terminals and at a time where, and the last two years, every business, if they’ve survived, has been struggling. You know, first for an 18 month period of openings and closures, and then rolling into this current era with this, first of all, increased competition for workers, which has raised wages not enough, but it has made the competition for those workers force restaurants, uh, and, and cafes, bakeries, really everything in the service sector forced them to finally have to offer competitive wages. Which is sent their costs up at the same time every other cost has gone up. You know the point at which inflation in Canada reached its height of seven point something, uh, on an overall level within the, the food sector groceries, it was 13 something, right? It was almost double that, so there was such a whammy to restaurants. It made something that the consumer doesn’t even think about, like the cost of filling up a deep fryer, sometimes double and triple, which, you know, if you’re serving something that people expect to be cheap French fries, even that became a luxury. So it really forced operators to look at the numbers and say, where can I afford to save money? And that’s where it scares me, cuz it pushes them into the zone of saying, well, if I could pull the same scam that restaurants have been pulling for decades, which is to get customers to subsidize my labor costs through tipping and we’ll pretend it’s voluntary.

Jordan When we talk about how businesses are approaching tipping, and when we put it the way you just said, you know, that we’re subsidizing labor costs and then you see, uh, more and more businesses requesting tips or the businesses that already do setting those prompts at a higher percentage. — what kind of, and I’m not trying to get like super philosophical here, but what kind of message does that reinforce to us and just to everybody that touches that part of the industry?

Corey Mintz Well, it pushes us into the zone and let me clarify if I didn’t do it enough already. The concept of the tip is in theory for most consumers, you go out, you have a good experience, and you let people know how grateful you are by, by tipping, right? But if most of us, and, and most of us do, according to the academics I’ve interviewed, tip the same percentage almost all the time, except for the rare occasions. If most of us. pretty much all the time. Then it’s really part of the expected cost of going out. Right? The $10 sandwich, it’s really a $12 sandwich if you were, if you pretty much always tip 20%. But by pretending that it’s voluntary, we’re able to artificially keep those menu prices lower than they should be. And we’ve been doing that for a long time. It has prevented people from charging what they actually. Need to charge. And as this spreads as it has been, as this creeps outwards, it introduces. This dangerous idea that, uh, Americans love and, and Canadians love an American idea, which is that individual private charities should, should do what businesses and government really have a responsibility to, which is to pay people properly, right? It’s not the state’s responsibility. It’s not the, the employer’s responsibility. If people want a, a better paying job, go somewhere else, pull theirselves up by their bootstraps but private charity can take care of these things. I think that’s a a, that’s the really dangerous road that I don’t wanna see this going down.

Jordan There’s a line that’s not that thick between, you know, those stories you see on, uh, the American news about like town all chips in to get lifesaving surgery for a kid who doesn’t have health insurance and like workers at a restaurant all pool, their tips to help so-and-so pay their tuition, like it’s not that far away.

Corey Mintz Yeah. The, I mean, tipping is — you can call me out on this if I’m wrong — tipping is on a micro level, the equivalent of in America, what we see every day, the crowdfunding for something that the government should be providing, right? The crowdfunding for someone’s surgery.

Jordan And in this case, it’s just what the ownership of the restaurant, cafe, et cetera, should be providing, which is, to your point, at the beginning of all, this is a living wage. And if they’re providing that, then you don’t necessarily need to subsidize it with tips and theoretically at least, tipping goes back to being something you do because you had an amazing experience or a horrible one.

Corey Mintz Sure. It’s not an act of generosity if it’s actually a cultural norm that you would be embarrassed not to act on. It’s not voluntary if it’s expected.

Jordan So, given that this isn’t going away tomorrow, and we can talk maybe in a minute about how we could even try to make it go away if we wanted to, which I don’t know is possible, the cat’s kind of out of the bag. You mentioned earlier that you talked to experts about tipping. What do they say about this new era and what we should do about it or what we’re expected to do?

Corey Mintz Well, I can answer that question and, and allude to the first, you know, the people that I’ve always reached out to have been, um, the three academics. There’s Bruce McAdams and his collaborator, uh, Michael von Massow, professors at the University of Guelph. And McAdams, the last time I contact him to say, “Hey, can I talk to you about tipping?” He just said, “I can’t talk about tipping anymore. I’m done. Nothing’s ever gonna change. I’ve been in advocating for change for a long time. It’s not going away.” And Lynn, uh, sorry, uh, professor Michael Lynn at Cornell, he’s been studying, uh, tipping since the early nineties. If you’ve ever, uh, paraphrased that truism that, you know, if a server touches you on the elbow and it increases their chance of tipping or little things like that, that’s based on his research, right? He’s the godfather of tipping research. And he said to me, these conversations are cyclical, at least as far as he knew. It goes back to the seventies every five or 10 years. There’s some, some sort of incident that sort of sparks discussion and people talk about it, but ultimately, tipping isn’t going anywhere. And one of the things that, that, that compelled me to sort of, uh, frame that, uh, that Globe and Mail piece that I did in the way that I did was this quote I saw from Professor Lynn on CNN where he just said, “I don’t know how much tip anymore and I study this.” You know, the idea of him throwing up his hands and going, “Oh God, I dunno.’

Jordan Well, that’s how I feel too and clearly how you feel.

Corey Mintz If he’s been studying tipping for 30 years and he doesn’t know I, how much does any, any person walking in Starbucks know what the cultural expectation is? Certainly in that split second but, uh, you know, if we as, as we’ve seen this sort of go round and round, there are the, the restaurants who put an effort into it. And, you know, everyone likes to cite the example of the Danny Myers group, the Union Square Group, which, which when no tipping, I think 2015, and then reverted back. And you know, the naysayers like to cite that as an example of it can’t be done. I’d argue it’s an example of a maybe too large a company trying to do it maybe the way that didn’t work. The companies, including I’ve worked as a consultant for a restaurant that eliminated tipping, and they just contacted me recently to say it’s almost a year later, we’ve held on all our staff and our sales, which is, which is our number one worry. So if you’re really committed, it can be done, but it’s still gonna be an infinitesimally small percentage of operators who want to do that. I don’t think tipping is going away anytime soon. It is a deeply entrenched part of our culture that people are taught but not taught to think about. And it’s, it’s codified into our laws, uh, all across Canada and the United States through laws in, in most regions. Ontario recently actually eliminated that I, this, and I believe so did BC of paying people less when they’re tipped, meaning because you earn tips, uh, legally you can be paid less than the minimum wage. And when you’ve got something like so worked into our law, our labour laws like that, it’s, it’s kind hard to make a change. It’s not exactly the number one issue for people today. So there’s no political will to make that happen.

Jordan If governments wanted to. What would they do? And I ask this because during this conversation you’ve kind of mentioned a few times that you know, places can use tips as a way to get around taxes on playing employees and a way to move money around that perhaps should be, you know, clearly defined as what they’re spending it on. Could the government just outlaw tipping? I know there’s probably no political will to do that, but like is there a large scale solution to be found.

Corey Mintz I hate to say yes and no cuz it seems like such a middling answer, but, but yes and no. I think there’s, there are policy changes that can be made to improve the situation, but I don’t think eliminating tipping is achievable, nor is it necessarily the goal much as in the end on a tipping abolitionist. First of all, we can and should eliminate the sub minimum wage for tip workers. There’s just, there’s no justification for it. All that does is incentivize more employers to say, some of my workers get tips, I can pay them less. But at the same time, you know, the conversation about the minimum wage is, for me, really shifted into the conversation about the livable wage because of what relevance is the, you know, throughout Canada, there’s a range of them in, in Manitoba, I think it’s 14 something on Ontario, but either way it’s different from an actual living wage. In Winnipeg it’s 18 something, in Toronto it’s 22.40, and in Vancouver it’s 22 something. Mandating that is what would make a difference. What I just suggested is so farfetched and also like mandating a 30% , basically requiring the minimum wage to be equivalent to a calculated livable wage is, you know, it’s anathema to the business community. I would argue that the modern definition of a business should include one that pays its people enough to afford to live in the place where they work. Otherwise, what value is this business? What, what good do they contribute other than to the primary stakeholders? But there’s something that consumers can do, which is to ask about that, particularly at this time where we’re seeing this tip prompt. That’s, that’s what I do.

Jordan So how do you do that? Cuz that was gonna be my last question. You know, I can’t figure my way around this. I run into places where I don’t feel like I should be tipping, but I’m getting the prompt and I feel bad for, you know, for, for skipping it. And I just, I don’t know a tactful way to handle it without just, you know, shutting up and paying 20%, which listen in many cases I don’t mind doing. But also it feels like I’m just not getting something.

Corey Mintz I’d say, first of all, I do what you just said, I shut up and I pay 20%. That’s what I do. But that’s the first step because I do have questions, but I shouldn’t be asking my questions to the person behind the counter who didn’t make these rules, who doesn’t need to be put on the spot from some dude who just walked into the store who’s like, um, lemme pester you about your business’s policies. And I don’t wanna inconvenience the people standing behind me in line. I’m not gonna have like a policy discussion while you know the person behind me wants their breakfast burrito. But if this is a place of more than passing interest, like I didn’t just jump off the highway, then I take the time, I look at their website, I find the contact information, I write an email, uh, to the owner and I ask like, do you pay a living wage? Because that’s really all that matters. If they don’t, why don’t they, right. If they do, then the tipping’s fine. And if you wanna tip on top of that now, you know, great. So they pay a living wage as it is calculated, uh, in the region where you live. And if you wanna tip on top of that, great, that’s a cherry, that’s a bonus. But I don’t have to worry that the people who work there like can’t afford to get to and from work or pay rent. But I think it’s doing that bit of due diligence, but going to the people responsible and hastling frontline workers.

Jordan Corey, thank you for this. I’m not sure it, it will help me really figure out tipping because I don’t know if anybody can. But thanks for giving us some options and thanks for explaining what’s going on.

Corey Mintz Thank you. And shout out to the people in Japan, China, soap, Korea, Georgia, Iceland, Perus, Spain, Thailand, Australia, Finland, Norway, Denmark, Belgium, the Netherlands, Switzerland, Croatia, around in Brazil where they don’t have tipping. So it’s possible to wrap your head around.

Jordan Corey Mintz wrote about tip creep in the Globe and Mail. He’s the author of The Next Supper, a book you should definitely read if you like eating at restaurants. That was The Big Story. For more head to The Big Story podcast.ca, you can actually hear us. Talk to Corey about his book. If you head down to the search bar at the bottom and type in his name, you can also of course find us on Twitter at The Big Story FPN. You can email us hello at The Big Story podcast.ca, and you can call us at 416-935-5935. If you have stories about tip creep, that sound weird and outlandish. Send them to us. Well, at the very least, pass ’em along to Corey if we don’t read them out here. The Big Story is available in all your favourite podcast players, and you can ask for it on a smart speaker by saying, play The Big Story podcast. Thanks for listening. I’m Jordan Heath-Rawlings. Have a great weekend. We’ll talk Monday.